SCF charge had 'profound impact' on life

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Being charged in the South Canterbury Finance (SCF) case cost its chief financial officer his marriage and his career, the High Court at Timaru has heard.

Graeme Brown is on the stand today as part of the defence of SCF directors Ed Sullivan and Robert White, and chief executive Lachie McLeod. The three face 18 charges brought by the Serious Fraud Office (SFO) following the $1.58billion collapse of SCF.

Brown, the firm's former chief financial officer from 2006 to January 2010, could have been in the dock with the three facing a sole charge; however, this was dropped in August last year.

He told Justice Paul Heath the charge had a profound effect on his life. "There was the loss of my relationship and a change in career."

He had become frustrated when the transcript of his interview with the SFO had not been provided. An SFO staff member said that in a phone call Brown had become aggressive and he was attempting to derail the trial.

"How could I do that [derail the trial]? I was frustrated and agitated and I apologised."

Brown's charge was one of false accounting, by transferring a loan from SCF of $10m to Kelt Finance, which was then advanced to Southbury. This charge was dropped by the SFO in August last year.

He told the court the transaction was a legitimate one.

He was concerned impaired loans had not been truthfully recorded, as the late chairman Allan Hubbard would buy them at face value. In an email, Brown recorded SCF had been, "telling less than the truth regarding asset quality for some time now".

In another email, he said: "We continue to defy gravity and report great results by fudging the truth. The market will not be able to work out how after enduring three tough years really well and as New Zealand is about to come out of recession we suddenly fall to the floor."

He told the judge he had no doubt provisioning and asset quality of SCF was accurate.

"Mr Hubbard's approach to loans likely to default was to buy them at face value and warehouse them himself. In terms of SCF accounts the loans didn't exist as they had been repaid at face value."